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Procurement As The Driver Of Human Progress

July 5, 2010

The world is often filled with pessimistic thoughts. Today we are surrounded by predictions of catastrophe from global warming, water shortages, religious conflicts, insufficient food or energy …. And while the list has changed, there have been similar prophecies of doom throughout our past.

Yet in reality, conditions for the vast majority continue to improve. I was listening this morning to an interview with the economist Matt Ridley (author of The Rational Optimist, referenced elsewhere in this blog). He was making the point that his childhood was surrounded by pessimistic views of the future, yet in reality his lifetime has seen a tripling of income for most people on the planet (in real terms) and on average an improvement of over 30% in food supply per person – even after the massive population growth of the last 40 years. 

The fascinating point that he made regarding our relative income is that progress has mostly been achieved because of a dramatic increase in buying power.In terms of the hours of labor needed to acquire a specific good or service, things today are quite simply much cheaper than they used to be.

Ridley also made the point that the old saying ‘Necessity is the mother of invention’ is not true. Invention and innovation do not come from the most needy societies, but rather from the most prosperous. And it is these most propserous societies that have also led the way in pushing down prices, as more and more people demand to share in wealth and as companies see opportunity from growing markets, rathe rthan raising prices.

The explosion of relative human wealth has occurred in conjunction with the ‘professionalization’ of Procurement. And as we all know, Procurement’s role has largely been focused on driving down supplier prices. Of course, it seems improbable that there was a conscious movement to link global wealth with modern procurement practices,. It is more likely that the drive for mass production created an ever greater need for discipline and rigor in purchasing procedures. Yet whatever the connection, it has proved to be a happy conjunction.

So while many people disparage the role of Procurement and its unrelenting focus on input costs, it is important that we recognize the contribution this focus has made to our relative wealth and prosperity – and what we might lose if it went away.

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